Digital Futures and the Practical use of NFTs
How brands can keep pace with an ever-evolving digital world
As consumption trends towards digital, brands turn to technologies like NFTs to create deeper consumer experiences, premiumise products, open up new revenue streams, and deliver on their sustainability ambitions with functional, near future applications.
NFTs and articles about them populate the internet on what seems like a daily basis. From evangelists to naysayers, opinion stretches the spectrum — for some this technology represents a new digital future for society, while for others it’s just the latest snake oil to hit the market. But while so many focus on the metaverse, at Echo we wanted to explore the practical applications of NFTs today, focussing on solving real-world challenges and discovering how traditional product brands can deliver in the digital domain, as well as the opportunities for enhancing consumer engagement.
From online shopping to social media, we already engage and consume digitally. But as society continues to evolve, new technologies promise to blur the lines between physical and digital spaces like never before. Technologies like augmented reality that overlays digital elements into our physical world, and virtual reality which convincingly transports our physical consciousness into an entirely virtual space, are already opening up huge possibilities for brands to build new experiences that bridge the divide between our physical and digital selves. NFTs are among the latest digital tools hoping to create new avenues to delight consumers, unlocking new revenue streams in the process.
What are NFTs?
In the simplest of terms, NFTs are unique ID tags that can be used as digital certificates of authenticity, storing information about the product in question and who it belongs to. All information added to an NFT can be seen by the viewer, and previous information is retained and uneditable, making them secure, untamporable, and fully transparent stores of data. They can be attached to physical or digital products and ownership is transferable, with the ability for a percentage of the sale, in the form of a royalty fee, to go back to the original creator each time the NFT’s sold. It is worth noting that NFTs can be energy intensive to create but we are already seeing companies innovate in this space to drastically reduce the carbon footprint of NFTs and make them more environmentally responsible.
NFTs rose to prominence around digital artwork. Suddenly artists on platforms like Instagram were able to monetise their work like never before, opening up the possibility to own and authenticate entirely digital goods. Of the many legitimate and interesting applications of NFTs across different industries, there have been just as many misguided examples that have fuelled scepticism and hostility around the technology. The biggest criticisms brands face when adopting NFTs is that they appear to be capitalising on a trend rather than utilising the technology to create a benefit for the consumer. NFTs are a tactical tool and they have a place in a brand’s comms and marketing mix. However it’s important to consider the context in which they are used to ensure they align with the overarching strategy for the brand. Whether they are used for shorter term consumer engagement or longer term brand building, there are huge practical applications for NFTs that brands around the world are already exploring.
Here are some ways brands can innovate by making use of NFTs today:
Logistically, NFTs have an interesting place in the supply chain due to their traceability and the transparency of their data. As a unique ID tag they can be used to track a product’s journey, containing information about the sourcing, manufacturing, and distribution of each product, made accessible by simply scanning a QR code. With transparency and traceability a critical part of the sustainability conversation, NFTs have a vital role to play in helping brands demonstrate their commitment to people and planet and verifying their sustainability claims, strengthening the relationship consumers have with the brand and informing purchasing decisions.
As unique tokens, NFTs lend themselves really well to limited edition, luxury, and collectible items that trade on the idea of exclusivity. For early adopters looking to secure a product at launch or one of only a few numbered items released, NFTs can provide a sense of immediacy. Rather than pre-ordering a product, which gives brands the promise of payment upon release, NFTs can be purchased before the physical product hits production, providing consumers with a sense of immediacy and satisfying their need to secure ownership of a product before launch, as well as generating early revenue for the brand. NFTs act as proof of ownership guaranteeing fulfilment, and as a token holds the corresponding value to the product in question that can be sold on or gifted. Digital assets included with NFTs help premiumise the experience, adding to the total package and delighting consumers while they wait for the physical release.
NFTs act as a secure digital certificate of authenticity providing an untamperable record of information that can eliminate counterfeiting, ensuring a product’s quality and verifying its origins. This is particularly useful for limited edition and collectible items, as NFTs provide a layer of credibility that gives consumers confidence when making a purchase, particularly when these items are most likely acquired in the resale market, and especially important within high counterfeit categories. Royalty fees built into NFTs allow brands to benefit from the sale of their products post-purchase, unlocking passive revenue streams from recurring transactions. The royalty rate is set by the brand and embedded into the code or smart contract of each minted NFT, activated upon sale. This grants brands access to the lucrative second-hand market where reseller platforms like StockX have traditionally been the main beneficiaries.
Data helps brands better serve their customers. At a basic level, NFTs allows brands to monitor the products that customers buy, who owns what, which ones they own at a given time, which products they are reselling, how much they are selling for, which products in the market are selling well, and how long before they are resold or recycled. As a data gathering tool, NFTs allow brands to better monitor demand, use, and consumer preferences that can inform product development and personalisation for a more intimate consumer experience.
The consumer doesn’t see where a product ends and the brand begins. The same is true for their interaction with the brand, whether it be digitally or physically. Acknowledging the blur between these boundaries is increasingly important to help build a seamless experience for consumers. Just as we exist in a 3D space, the logical evolution of the digital world is one that will become increasingly three dimensional. While owning 3D virtual products in the metaverse seems a bit distant and disconnected with near-future needs of consumers, digital 3D product placement, with integrated NFTs associated with real world products, is a much more tangible and immediately interesting application for creating immersive brand experiences that can used across games, augmented reality, and virtual reality. As product brands embrace digital, there will be an even greater need for parity between physical and digital renditions of the same product to ensure the brand is consistent across platforms. 3D packaging can be paired with digital renders placed in VR experiences, which could then be integrated with NFTs to allow the consumer to purchase the product on display, receiving a token for a physical product alongside digital assets that can be enjoyed. This would be particularly interesting for limited edition or luxury items that want to enhance the purchasing experience around their launch.
The most important question that brands have to ask themselves is what is the consumer need and what does this new technology enable us to deliver.
For those who successfully embrace them, NFTs have the potential to transform how consumers interact with both products and brands. The use of NFTs might require a call-to-action on-pack, at-shelf, or an inclusion in the brand’s narrative and sustainability communications. It could require the creation of digital assets that will be packaged alongside, including 2D artwork, 3D renders, animations, audio-visuals, interactive components, and cross-platform features or functionality that may require increased partnerships between brands and a variety of creative agencies.
Whether you’re looking to invest in this space today or want to explore the possibilities for the digital future of your business, we can help. As an innovation agency, we partner with leading brands to explore the future of consumption, analysing trends in technologies and consumer behaviour, and outlining opportunities for brand and R&D pipelines.
Book a call with us to find out how our innovation programme can help unlock new opportunities that help you deliver a richer experience for consumers.